Politico reports:

The ruble tumbled on Wednesday to its lowest level in over two years, as a mix of low oil prices, new sanctions against Russian businesses and burgeoning government spending on its war effort put ever-greater strain on the Russian economy.

The central bank reacted by suspending currency purchases for the rest of this year. That will restrict the supply of rubles and should support the exchange rate accordingly. It took a similar step last year, after the mutiny of mercenary leader Yevgeny Prigozhin triggered another crisis of confidence.

As such, the measure will help to keep a lid on a growing inflation problem, which has forced the central bank to raise its key interest rate to 21 percent. Official data show inflation running at 8.5 percent, but private surveys such as those by market research firm ROMIR suggest that the actual rate is much higher.

The ruble has been under steady pressure all summer, as the price of oil — Russia’s most important export, despite Western sanctions — has fallen due to weak Chinese and European demand and rapidly growing supply from the U.S., Brazil and Guyana. Brent crude prices have fallen nearly 4 percent this week alone on relief at the ceasefire agreed to by Israel and Hezbollah.

That pressure intensified after the U.S. imposed a new round of sanctions on Gazprombank, which until then had been allowed to process payments for what remains of Russia’s gas export business to Europe. The new package also targeted 50 internationally connected Russian banks, more than 40 Russian securities registrars, and 15 Russian finance officials. [Continue reading…]